Michael Hardy Blog, News & Updates

What does sale by tender mean?

13 January, 2016

Sale by tender arguably one of the property industry's most jargonistic terms, seemingly devised to confuse the people it impacts most: those who buy and sell property. The least we can do, then, is have a go at explaining it in plain English. After all, your understanding could be the difference between getting the deal of a lifetime and having to endure home-buying hell.

A silent auction

The best way to describe the sale by tender process is as a sort of silent auction. A property will be put up for sale with a deadline for bids. Anyone interested has until that date to submit their best offer, without having seen anyone else's bidding activity. There may or may not be a guide price published in the advert but prospective buyers will have typically been invited to an open day at the property.

It can help to compare sale by tender with something that you probably see a lot more often; an eBay auction, for example. Imagine if there was no price given on an item, and you placed your bids blindly, without knowing how others valued what was up for grabs. How would that affect your own offer? Chances are the figure in your mind will differ from that considered appropriate by the next person - the benefit being that both parties could potentially get a better deal than they first expected.

The fees and costs

For the seller at least, sale by tender can work out to be pretty cost-effective - most will be enticed by the low fees they're required to pay. In some cases, it'll cost just a couple of hundred pounds to get the sale ball rolling - much less than the fees that would normally come with selling your home.

How can this be? Surely the estate agent still has to make some money? Yup, but this comes from the buyer's side. As part of the deal, the buyer will commit to paying a finder's fee to the estate agent. It's normal for this to be around two per cent of the final price - so £2,000 on a £200,000 house.

A little controversy

It's this concept of charging both parties - and perhaps the cost imbalance - that has made the practice of sale by tender somewhat controversial. After all, the estate agent is usually working on behalf of, and is therefore paid by, the seller. Having it the other way round might seem unfair to some, but it's important to note there are benefits on offer to both parties here.

Those who look to buy in this way may find they get a great deal on a property they would have otherwise either paid over the odds for, or may not have been able to afford at all. This is because the chances of a bid being accepted are influenced heavily by the undisclosed offers made by other people.

So there you have it, sale by tender might not be the best option for you, but it will work for some buyers and sellers. Get in touch with our experts today to discuss your options.